CBM’s Retail Shopping Center Management & Leasing Blog

Retail Real Estate News & Trends in Southern California
 

2424 E. Katella Avenue, Anaheim, CA

Centers Business Management (CBM) leasing agent, Jason Ross, recently completed a lease transaction representing the tenant, Papos Cuban Restaurant, on a 1,299 SQFT retail space. The unit is situated in the Starmont Shops at Stadium Towers, a newer retail development at the foot of the Stadium Towers office park, on busy Katella Avenue right at the entrance to the 57 freeway in prime Anaheim. Boasting exceptional curb appeal, the modern-styled center’s A+ co-tenants include Comerica Bank, Rudio’s Fresh Mexican Grill, Calvino wine bar, Subway, Hooters, and Wholesale Nutrition Center.


1630 ½ Anaheim Street, Long Beach, CA

Centers Business Management (CBM) leasing agent, Matt Saker, recently completed a lease transaction representing the landlord, in a deal with a boxing gym, on 7,500 SQFT street retail space. The storefront unit is on busy Anaheim Street, just east of Walnut Avenue in Long Beach. The site is adjacent to a Metro PCS location and across the street from a large, well-patronized Dollar City discount store.


1246 W. Foothill Boulevard, Upland, CA

Centers Business Management (CBM) Valley Division Director, Dave O’Connell, and leasing agent, Zac Ryburn, recently completed a lease transaction representing the landlord and tenant, Planet Fitness, on a 4,000 SQFT retail space. The unit is in a large community shopping center at the intersection of Foothill and Mountain in prime Upland. In addition to the Stater Bros, the center’s notable co-tenants include Big Lots and busy Chevon Gas station on pad space situated on the center’s hard corner.


Taken a gander at the news lately?

Seemingly every second headline touts the closure of yet another retailer. Either they’re “downsizing” (or “rightsizing” in the politically correct vernacular) and shuttering locations. Or they’re closing up shop altogether.

Here are some of the more notable retailers currently “rightsizing” their operations or on their way out for good…

  • Toys R Us – 735 locations
  • Abercrombie & Fitch – 60 locations
  • Foot Locker – 110 locations
  • Best Buy Cellular Stores – 250 locations
  • JC Penney – 8 locations
  • Sam’s Club – 63 locations
  • Macy’s – 11 locations
  • Michael Kors – 100 locations
  • Sears & K Mart – 103 locations
  • J Crew – 50 locations
  • Gap & Banana Republic – 200 locations
  • Teavana – 379 locations
  • Ann Taylor, The Loft, Dress Barn and Lane Bryant – 268 locations
  • Nine West – 70 locations

Obviously, this is bad news for a large segment retail real estate. But notice something all of these businesses have in common?

None would occupy a typical strip center. Malls, for sure. Power and lifestyle centers, too. And probably large-scale regional strips as well.

But you wouldn’t find any of these businesses in your everyday urban shopping center.

And this shift, believe it or not, is GREAT news for shopping center landlords like you!

Why, you might be asking?

Well, a number of economic, societal, and business development factors are at play, which is not only enhancing the value of strip center real estate but ensuring the stability of this asset for years to come.

Specifically, here are five key elements that make this the best time in history to invest in strip center real estate…

1. Demand for Services

Much of “traditional retail,” which has depended largely on selling physical products, is disappearing.

But guess what’s not diminishing? The public’s demand for services, a demand that’s ramped up like never before.

Nail salons, massage, tax prep, insurance, tutoring, child care + early child education, pet grooming + kennel services, veterinary clinics, urgent care, dental clinics, optometry, martial arts studios, fitness and personal training, restaurants, cafes, bakeries, and the list goes on and on.

And where do the vast majority of these businesses locate?

Your good ole traditional urban strip center!

And speaking of restaurants…

2. Eating Out is Outpacing Grocery Store Sales

In 2016, for the first time in history, gross restaurant sales exceeded grocery store sales.

In other words, the nightly “menu plan” for many American families has become picking from a deck of quick-serve takeout menus.

And once again, where do most quick-serve and fast casual restaurants locate?

You guessed it, retail strip centers!

3. Strip Centers Have Already “Rightsized”

Once upon a time, urban strip centers hosted their share of tenants selling physical products.

But as department stores, and large-scale discount stores, like Walmart, Target, TJ Maxx, Marshalls, Ross and others crept into the retail landscape in the ‘80s + ‘90s, small format retail stores selling physical products were steadily edged out.

And with the rise of internet sales beginning in the early aughts, by the end of the first decade of the new millennium, product sales based retail was in the serious death spiral.

Thus, strip centers have already weathered this contraction and reinvention storm currently facing shopping malls and other large format shopping centers. And strip centers have not only weathered the storm but righted the ship and become more profitable than ever!

4. Smaller Spaces + Reasonable Rents = Lower Attrition

Looking at the list of failing retails above again, what’s another common thread among these businesses?

All either occupy physically large sites or are positioned in high-profile locations. Two factors that demand high rents.

So, of course, when sales fall off, it’s impossible to meet those significant financial obligations. And business either downsize or fold up their tents for good

Strip centers units, on the other hand, are far smaller and typically situated in urban locations that don’t command the same “prestige” as shopping malls. Also, on average, strip center rents are far less expensive.

So, while sales may ebb-and-flow, a bad month, or even a bad couple of months, isn’t likely to sink a tenant’s entire operation.

5. Reasonable Rents = Easier to Lease

When JC Penny’s vacates a mall, abandoning 50,000 SQFT, what’s a landlord to do? The odds they’re going to find a replacement tenant willing to take even a fraction of that space or pay anywhere near the same rent are slim to none.

So, not only has the landlord lost that income, a huge hit to their bottom line, but those dollars may never be replaced.

Meanwhile, when a cellphone tenant paying $2.50 per foot vacates a 1,200 SQFT space in corner strip center? It will probably only take a matter of months to replace that tenant. And in all likelihood, the new rent will be higher.

The Bottom Line? Strip Centers Are a Secure Investment…

The headlines are genuine. There is real carnage in the retail real estate industry at the moment. And there’s likely to be some serious pain for many involved.

But strip center real estate has already weathered this storm. Retail strip centers have adapted to the “service economy.” Locations were “rightsized” years ago. And most strip center landlords aren’t facing financial ruin if a tenant goes out, because the economic hit is minimal, and the income imminently replaceable.

The Key to Maximizing Your Strip Center Investment?

Effective leasing and property management.

Quickly filling vacancies with qualified tenants that synergize with existing operators is key to maintaining your income stream.

While ensuring your property remains in good condition and fostering positive tenant relations is critical to keeping tenants in place.

Need Leasing + Property Management Support?

CBM can help! Visit our Services page to find out more about our retail leasing + property management services.


622 Mission Street, South Pasadena, CA

Centers Business Management (CBM) leasing agent, Barry Bussiere, recently completed a lease transaction representing the landlord and tenant, a local nail salon, on a 928 SQFT retail space. The property is at the intersection of Mission and Grand in prime South Pasadena. The site is directly across the street from a well-patronized Trader Joe’s grocery store.


16182 Pacific Coast Hwy, Huntington Beach, CA

Centers Business Management (CBM) leasing agents, Jason Ross and Aaron Guido, recently completed a lease transaction representing the tenant, Surf City Coffee, on a 1,485 SQFT freestanding retail building. The unit is in a building on the Pacific Coast Hwy, just south of Anaheim Bay, positioned between the Pacific Ocean shoreline and Huntington Harbor. The site backs up to the marina and the enormous residential development situated along the harbor waters. Nearby upscale tenants include Katin Surf Shop, Don The Beachcomber, Glow Hot Yoga Studio, Shoreline Hookah Lounge, and more.


1886 ½ S. Pacific Coast Hwy, Redondo Beach, CA

Centers Business Management (CBM) Valley Division Director, Dave O’Connell, and leasing agent, Zac Ryburn, recently completed a lease transaction representing the landlord in a deal with Wild Birds Unlimited, a local bird feed and supply store, on a 2,025 SQFT retail space. The unit is in a large community shopping center at the intersection of Pacific Coast Hwy and Prospect Avenue in prime Redondo Beach. The newer, well-maintained center is anchored by CVS and features a diverse co-tenant mix, including Subway, Corner Bakery, Supercuts, and more. Additionally, a well-patronized ARCO gas station is positioned on a pad space at the property’s hard corner.


Los Angeles, CA – April 2018, Centers Business Management (CBM) completes new leasing transactions with expanding pet supply retailer, Centinela Feed & Pet Supplies on Beach Boulevard in prime Huntington Beach.

CBM leasing agents, Aaron Guido, representing the landlord, and Jason Ehrenpreis, representing the tenant, recently completed a new 10-year lease with Centinela Feed & Pet Supplies on busy Beach Boulevard in the heart of Huntington Beach. Centinela Feed will be occupying an 8,100+ SQFT space in a sizable neighborhood center just south of Main Street. The well-located center is situated immediately adjacent to the Elan apartment complex, a newly constructed 6-story, mixed-use development. The impressive structure features 274 apartment residences positioned above ground floor retail, home to a variety of notable tenants, including Scottrade (securities brokerage), Floyd’s Barber Shop, Creamistry (artisanal ice cream maker), and more.

Centinela Feed & Pet Supplies began on Centinela Avenue in what is now the West Los Angeles community of Mar Vista, in the 1930s. The parents of current owners, Chris and Dwight Nakagawa, purchased the store in 1974, and business has remained family owned ever since. When Chris Nakagawa formally took over the business in 1987, Centinela began slowly expanding, opening its second store in 1989. Centinela currently operates 16 stores in total, with two more locations slated for launch this year. Looking toward the future, Centinela intends to secure a third site before the close of 2018, and aim to open three additional locations in 2019.

“Though an end-cap space fronting onto busy Beach Boulevard, the unit is quite large, not mention an odd layout,” says CBM leasing agent, Aaron Guido, adding “the landlord had elevated expectations for the center,” speaking to the property owners hopes to secure an aggressive rental rate and qualified credit tenant. These two factors ensured leasing the unit would be a challenge. Centinela, however, proved an ideal tenant. “Centinela was willing to take the entire space, despite the excess square footage” Guido notes, adding “They agreed upon a highly competitive lease rate on a ten-year deal, balanced with tenant improvement dollars and rent abatement.”

By “Exercising ample creative vision, Centinela saw a path to making use of the space, and was willing to accept the unusual layout,” asserts CBM leasing agent, Jason Ehrenpreis, Centinela’s exclusive representative broker. “Additional storage for stock, along with entertaining the possibility of offering grooming, kennel boarding, and other pet-care related services are all options Centinela considered in their decision to lease the space,” Ehrenpreis reports. Ehrenpreis also notes: “This is Centinela 2nd deal in OC in the last few months,” underscoring the retailer’s continued efforts to “expand their Orange County presence.” And the center’s exceptional Beach Boulevard visibility and prominent positioning next the mixed-use Elan development renders it an ideal location for Centinela’s hopes to further raise its OC profile.

“This deal is proof there’s a tenant for EVERY space!” proclaims CBM President, Rick Rivera. “Whether we’re talking about landlords or tenants, everyone wants what they want,” Rivera observes, concluding “And it’s our job as brokers to bridge the gap, and craft a mutually beneficial compromise, which we clearly achieved in this case.” Though many retail-based businesses have been afflicted by rising eCommerce sales, Rivera notes: “Pet supply has rebounded thanks to astute customer care and in-store offering pet-related service offerings,” in reference to Centinela’s continued stability and robust plans for future growth.

For more information about CBM and their retail leasing and property management services, please contact: Rick Rivera 310.575.1517 x201 | rickr@cbm1.com.

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If you’re like many retail landlords, you have an “ideal tenant” in mind for the vacancy that just popped up in your shopping center.

With all due respect, however, your perspective a likely off the mark. That’s not to say you don’t know your property. Undoubtedly, you know it better than ANYONE.

But knowing your property isn’t the same thing as understanding…

== > How these tenants synergize with your existing tenants
== > Area residential / daytime population and average annual household income demographics
== > The tenant-types that succeed in this area
== > The tenant-types actively seeking space in this area
== > Typical monthly budget
== > And what deal incentives (TIs, free rent, options, annual increases, etc…) these tenants seeking

See what we mean? There are a fist full of crucial factors to consider in the tenant selection process.

And toward that end, here are the four key elements to keep in mind when you’re weighing potential retail tenants to fill a vacancy in your shopping center:

Does the Tenant Synergize with Existing Tenants?

When it comes to selecting a tenant, synergy is the FIRST + MOST IMPORTANT consideration. No matter how sexy a tenant may appear, if their use overlaps with or fails to support existing tenants, you’re headed for trouble.

For example…

A gadget or computer repair store and cell phone sales + service store synergize beautifully.

But two competing cell phone service providers are likely to negatively impact the sales for one outlet or the other. And never mind that both are likely to demand exclusives.

On the same coin, a gadget repair store is likely to cannibalize a computer repair stores business and vice versa. And exclusives may be an issue in this scenario, too.

Similarly, with restaurants, co-tenancy among like ethnic foods is destined to create issues…

Imagine a center with Persian, Lebanese, and Greek restaurants. Or a center with Chinese, Thai, and Vietnamese restaurants.

The strong similarities between these cuisines will inevitably impact sales among the group. One restaurant is bound to rise above the others, and ultimately squelch their ailing competitors’ business.

The point here being, tenants that dovetail with one another, rather infringe, create synergy. Thus, an ideal prospective tenant synergizes with your existing tenants

What Tenant-Types Succeed in The Area?

Average annual household income, ethnic + racial makeup, and relative geographical location all factor into the potential margin for success for any prospective retail tenant.

Income Demographics

About 18 months ago, a check cashing location opened on Santa Monica Boulevard, just West of the 405 Freeway. In other words, in the heart of West Los Angeles, an exceptionally affluent community.

Meanwhile, the nicely built-out location, for which the landlord likely forfeited free rent in lieu of tenant improvement dollars, closed up shop six months later.

Check cashers are not in-demand tenants in more affluent communities whose residents are unlikely to be living paycheck-to-paycheck, they’re paychecks are probably transmitted via direct deposit, and they’relikely to bank with a mainstream financial institution.

Ethic + Racial Demographics

Let’s say a Mexican restaurant opens in a predominately Asian community, or vice versa, a Chinses restaurant opens in a predominately Hispanic area.
Now, arguably Mexican + Chinese foods both hold some universal appeal. But that appeal generally only applies to diverse communities or communities that don’t foster definitive cultural identities.

Relative Geographical Location

Now, this may sound like a rather ham-fisted analogy, but you wouldn’t open a surf store in downtown Los Angeles. Whereas, in Santa Monica, just blocks from the beach, is a no-brainer for such a business.

Similarly, fast food restaurants and gas stations are ideally suited to surround freeway on/off ramps. But out in the middle of nowhere, down some back-country road, such establishments make no good sense.

In short, proximity to geographical landmarks, whether natural or man-made, are key considerations in qualifying an ideal tenant.

What Tenant-Types Are Actively Seeking Space in the Area?

Restaurants currently rank among the HOTTEST retail tenant segments. But how many restaurants can a given area support? Eventually, a community is bound to reach a saturation point.

In such circumstances, restaurant tenants are unlikely candidates for your vacancy.

Conversely, a given location may be underserved. In 2016, restaurant sales exceed grocery store sales, a key factor driving current restaurant expansion. And if your property is in an area with a dearth of restaurants, a restaurant tenant is exactly the prescription for your vacancy!

What’s the Typical Monthly Budget of Tenants Active in Your Area?

In the end, it boils down to dollars and cents. A given business only generates so much income. As such, tenants can only pay so much in rent + CAMs. Beyond a certain threshold, the business ceases to be profitable and won’t last.

Understanding how much income certain businesses generate is critical to meeting retail-rate expectations.

What Incentives Are Suitable Area Tenants Looking For?

Tenant improvement (TI) dollars? Free rent in lieu of TI funds? Additional incentives for longer-term leases?

Awareness of the incentive specific tenant types and tenants operating in your center’s areas are seeking is a crucial factor in attracting the right tenants.

Additionally, understanding how to leverage those incentives is a critical component of lease negotiations.

Need Help Sourcing the RIGHT Tenant for Your Vacancy?

As you can see, MANY elements factor into placing the “ideal tenant” in your latest vacancy.

The good news is, you don’t have to wrestle with these issues! Instead, you can hire a qualified professional to lease your space for you.

And that’s where CBM comes in! Our leasing team is on top of all the factors outlined above and spend their days pursuing tenants to fill vacancies, just like yours.

For additional information on CBM’s leasing services, visit: cbm1.com/services.


12050-54 West Street, Garden Grove, CA

Centers Business Management (CBM) leasing agent, David Levcovitch, recently completed a lease transaction representing the landlord and tenant, a local coffee shop, on a 2,200 SQFT retail space. The property is on West Street, just east of Chapman in prime Garden Grove. The busy mid-block center features a diverse tenant mix, including mini-market, Zumba dance studio, nail salon, thrift store and more.